LONDON MARKET MIDDAY: UK Construction Data, Brexit Opinion Lift Pound

LONDON (Alliance News) - Coming off of Monday's rally from the ceasefire in the US-China trade ...

Alliance News 4 December, 2018 | 12:00PM
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LONDON (Alliance News) - Coming off of Monday's rally from the ceasefire in the US-China trade war, stock prices in London were lower on Tuesday, as the pound gained after a top EU court advisor argued the UK could unilaterally revoke its decision to leave the EU.

Also weighing on the FTSE 100 was plumbing firm Ferguson, which sank on a mixed set of first-quarter results.

The foreign-earner heavy FTSE 100 was down 48.39 points, or 0.7%, at 7,014.02 Tuesday midday. The FTSE 250 was down 117.82 points, or 0.6%, at 18,446.03 and the AIM All-Share down 0.9% at 929.62.

The Cboe UK 100 was down 0.9% at 11,897.69, and the Cboe UK 250 down 0.7% at 16,498.06. The Cboe UK Small Companies was up 0.1% at 11,407.00.

"European markets are on the slide in early trade today, with both the euro and pound spiking higher to the detriment of stock valuations. Market chatter has been dominated by talk over the implications of an announcement from a top lawyer at the ECJ, who stated that article 50 could be revoked unilaterally," said Joshua Mahony, market analyst at IG.

He continued: "With Theresa May’s Brexit proposal reportedly dead on arrival, markets have been facing up to the prospect of a harsher and more unpredictable form of Brexit. However, with some clamouring for a second referendum, the pound is spiking on the prospect that Brexit may never happen at all."

To make the decision to reverse Brexit conditional upon the agreement of all 27 other member states would be "incompatible" with EU rules on exiting the bloc, according to Advocate General Manuel Campos Sanchez-Bordona.

The European Court of Justice is due to rule on the issue at a later date. However, the Luxembourg-based judges usually follow the advice of their advocate generals.

The pound was quoted at USD1.2821 at midday, up from USD1.2740 late Monday.

Also boosting sterling on Tuesday was data which showed the construction sector expanded at the fastest pace in four months in November, thanks to an increase in new work and consequent gains in job creation.

The construction Purchasing Managers' Index climbed to 53.4 from 53.2 in October, beating economist forecasts for a score of 52.5. A reading above 50 suggests growth in the sector, whereas one below the mark indicates contraction.

The UK construction sector expanded for an eight month in a row and the latest reading was the highest since July. Job growth was the fastest since December 2015. However, business confidence was relatively subdued due to Brexit uncertainty.

IG's Mahony commented: "Providing the second consecutive improvement to the construction PMI survey, we are seeing some form of stability for the sector despite worries over house prices and demand given Brexit uncertainty."

The CAC 40 index in Paris and DAX 30 in Frankfurt were down 0.5% and down 0.6% respectively at midday.

Eurozone producer price inflation accelerated further in October, defying expectations, figures from Eurostat showed Tuesday. Producer prices rose 4.9% year-on-year after a revised 4.6% in September. Economists had expected the rate to remain unchanged at September's original figure of 4.5%.

On a month-on-month basis, producer prices increased 0.8% after a 0.6% rise in September. Economists had forecast a 0.5% climb.

In the US, stocks are pointed towards a lower open on Tuesday. The Dow Jones is called down 0.4%, the S&P 500 down 0.3% and the Nasdaq composite set to slide 0.5%.

In the FTSE 100, shares in plumbing and heating specialist Ferguson fell 4.2% despite reporting strong revenue growth in the first quarter of its financial year, as positive performances in the US and Canada offset a decline in the UK.

Revenue for the three months to the end of October was USD5.55 billion, up 9.0% from USD5.12 billion the year before, with organic growth of 6.7%. At constant exchange rates, US revenue rose by 12%, while Canada revenue increased by 8.9%; however UK revenue fell by 9.5%.

"Despite renaming its business from Wolseley to Ferguson last year to reflect the importance of this US brand, the plumbing and heating products distributor can't entirely escape the problems dogging its UK division," commented AJ Bell investment director Russ Mould. "Although this shouldn't detract from a strong showing for the substantially more material US arm, it does leave the company's fortunes very much tied to the American economy."

Sage Group was up 1.1% after the accounting software firm said it has appointed Non-Executive Director Jonathan Howell as chief financial officer, starting on Monday next week. Sage said that Howell will cease to be a non-executive director on commencement of his executive role. Howell has been on the Sage board since 2013.

Among the other risers, property portal Rightmove was up 2.6% after Deutsche Bank raised its rating on the stock to Buy from Hold.

BT was up 1.6%, also benefiting from a broker rating upgrade. Goldman Sachs upgraded the telecommunications company to Buy from Neutral.

Dented by a broker downgrade in the FTSE 250 was Kier Group, sinking 9.0% after the construction company was cut to Hold from Buy by Canaccord Genuity.

Online trading platform IG fell 6.6% after it said revenue in the half-year to November 30 is expected to be lower than last year due to new regulatory measures.

The spread betting and contracts-for-difference provider said it expects to report interim revenue around 6% lower than a year ago. In the six months to the end of November 2017, IG posted record interim revenue of GBP268.4 million, suggesting revenue in the recent year was about GBP252 million.

EU financial regulator the European Securities & Markets Authority put in place the prohibition on offering binary options to retail clients at the start of July, with restrictions on the provision of contracts-for-difference to retail clients effective from the start of August.

As a result, the company's revenue in the four months since all measures were put into effect is estimated to be about 10% lower than in the same period last year.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Rightmove PLC 433.00 GBX -1.57 -
Kier Group PLC 408.19 GBX -0.88 -
Ferguson PLC 4,869.43 GBX -1.50
BT Group PLC 250.05 GBX -0.60
IG Group Holdings PLC 539.50 GBX 1.03 -
Sage Group (The) PLC 589.60 GBX -1.11
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